This article originally appeared on Ecosystem Marketplace, and is reprinted with permission.
Patrick Spink was surprised to see how susceptible his company is to disruptions in the supplies of soy, palm oil and leather -- something he learned after signing up for the Forest Footprint Disclosure project (FFD) three years ago.
"Participation in FFD soon highlighted how we use a wide range of forest risk commodities -- paper in our printers, beef, soy and palm in our catering and leather for shoes, belts and bags," writes Spink, who is the Environment Executive at British Airways, in the FFD's Third Annual Review, which was launched last week and includes voluntary input from 87 companies.
"At BA, we use relatively small quantities fragmented across our global operation," he wrote. "What's more, there is limited transparency across our supply chain."
FFD Director James Hulse says BA's experience is typical of what companies find when they start to take a hard look at where their materials come from.
"BA moves 20 million people per year, and a lot of those people eat chicken that was raised on soy that was grown on recently-deforested land," he says. "That's the kind of indirect exposure you don't know you have until you begin to look beyond your tier-one suppliers -- and down to your tier-two and tier-three suppliers."
By trying to uncover that exposure, BA earned the top spot in the Review's Travel & Leisure sector -- one of 12 sectors covered. The Review lists top performers in each sector, but doesn't publish individual company scores. It does, however, publish aggregate scores for disclosure and action on 11 activities, from "Review of Your Supply Chain" to "Governance Process" and "Identifying Risks and Opportunities".
Know Your Sellers -- and Your Sellers' Sellers
By far the lowest scores came in two categories: "Sustainable Supply Chain Development and Support" and "Scope and Coverage" -- reflecting the difficulty of moving down from immediate suppliers to those who supply the suppliers.
"This is where a lot of work needs to be done," says Hulse. "It's also where you often hear it can't be done, but companies like BA, Nike, and Nestlé have proven that's not the case. Nike have supply-chain management like no other because of what they've been thru in the past, and Nestlé have documented 50,000 suppliers and 600,000 farmers."
Both companies, like BA, are also tops in their sectors -- with Nike Inc topping off Clothing Accessories & Footwear and Nestlé SA tied with Unilever Food for the top spot in Food Products & Soft Drinks.
Hulse believes that companies that get a handle on their supply chains will ultimately recover the cost of digging by reducing their risk.
"If you understand your supply chain better, you can make it more robust and resilient," he says. "This way, when you get disruptions, you're not as exposed to them because you understand what's going on and you have better relationships, so you have more security of supply."
Recent surveys like this one from MIT back him up: roughly one-third of companies that set out to make their supply chains more sustainable over the long haul found that such measures began to save them money almost from day one.
The $7 Trillion Carrot
Companies have different reasons for taking part in FFD. Many do so to protect themselves from disruptions of "forest risk" products, while others aim to improve their reputations. Some want to get ahead of measures like the U.S. Lacey Act the European Union's action plan on Forest Law Enforcement, Governance and Trade (FLEGT) imposing penalties on companies that don't monitor their supply chains properly, while a growing number simply want to get into the good graces of the FFD's backers: more than 70 institutional investors who collectively manage more than $7 trillion in assets and are also looking to shield themselves from supply risks.
"Leading companies around the world have realized that eliminating deforestation from their operations and supply chains improves their sustainability and resilience," says Theodore Roosevelt IV, who is managing director at Barclays Capital Corporation and namesake of his great grandfather, the conservationist U.S. President. "It makes good business sense."
Uneven Response Rates
It may make business sense, but more than 75 percent of all companies that FFD contacted chose not to respond. Indeed, response rates were below 50 percent in all but one country: the UK. In Continental Europe, the response rate was just 41 percent, and in the United States it was a dismal 17 percent. Developing countries were even worse, with a response rate of just 14 percent, but the worst of all were the developed countries of Australasia, where the response rate was just 5 percent.
"This may just reflect the fact that we reached out to more companies this year than we have in the past," says Hulse. "We went from 285 companies to 365 -- and our response rate actually went up a bit."